Work and Pensions Secretary rejects change to cost of living payment qualifying rules

The Work and Pensions Secretary, Mel Stride, has rejected a call to change the qualifying rules for the 2023/24 cost of living payments, according to an account of his response to the Work and Pensions Committee¹. The committee had raised concern about people losing out on the payment if they received a nil award of Universal Credit in the qualifying period because of fluctuating earnings or sanctions, and had asked him to consider their position for the 2023/24 payments¹. He rejected the call for a change¹.

Universal Credit is calculated on a monthly snapshot of income rather than any form of averaging, as happens in annual systems such as taxation¹. A one-off payment therefore cannot be flagged to the Department for Work and Pensions as a temporary increase in earnings, and in the computer system it simply looks like a high-paid month¹. The extra pay, including any backdated award, is then taken into account in the following monthly period¹. In most cases Universal Credit is reduced by 55p for every extra £1 someone earns after income tax, national insurance and pension contributions, unless they are disabled or have children and earn less than the relevant work allowance for their circumstances¹.

The practical effect is that a one-off back payment can reduce someone's Universal Credit to zero, and receipt of Universal Credit acts as a passport to other entitlements, creating a cliff edge at the point where entitlement falls away¹. That cliff edge includes the £900 cost of living payment that people on Universal Credit and other means-tested benefits will receive in 2023/24¹. The exact dates of the three payments have not been announced; they are known only as Spring 2023, Autumn 2023 and Spring 2024¹.

The issue has arisen alongside a trend of using one-off payments to settle industrial disputes¹. Full-time council workers received a one-off payment of £1,284 gross at the end of November as part of the local government pay settlement, and a one-off payment has been floated as a possible way of settling the dispute with nurses¹. If an agreement is not reached within the current financial year, or by Easter at latest, there is a real danger some nurses on Universal Credit will miss out on the next cost of living payment, if their Universal Credit is reduced to £0 when they receive back pay and this coincides with the qualifying date¹. Other employees in other sectors may be affected in the same way¹.

Why it matters for households

For households on Universal Credit, entitlement in a single monthly assessment period can determine whether a cost of living payment is received at all. A nil award in the qualifying period, whether caused by a one-off or backdated payment, fluctuating earnings or a sanction, means no payment for that round, and the Secretary has declined to change that for 2023/24¹. The three payments in 2023/24 are known only to fall in Spring 2023, Autumn 2023 and Spring 2024, so the qualifying dates have not been published¹. The reduction rate of 55p for every extra £1 earned applies after income tax, national insurance and pension contributions, except for claimants who are disabled or have children and earn below the relevant work allowance¹. Where a back payment is paid into a pension, net pay is unchanged and the Universal Credit award is unaffected¹.

What happens next

The exact dates of the three 2023/24 cost of living payments have not been announced¹. Whether the nurses' dispute is settled, and on what terms, remains open; if no agreement is reached within the current financial year or by Easter at latest, some nurses on Universal Credit could lose the next payment if back pay reduces their award to £0 at the qualifying date¹.